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Is High-Deductible Health Insurance Right for You?

July 17, 2015

High out-of-pocket costs may force some people to put off care.

High-deductible health plans are increasingly common — and may soon be the new normal in health care.

Almost half of large private employers now offer a high-deductible plan, along with three-quarters of very large companies. Most plans offered on the health-insurance exchange as part of the Affordable Care Act (ACA) also qualify as high deductible. A study by HealthPocket, which helps consumers evaluate health plans, found average deductibles in the marketplace are about $3,000 for an individual and $6,000 for a family signing up a Silver plan, the most popular option. The ACA limits out-of-pocket maximum costs under these plans to $8,150 for an individual and $16,300 for a family.

High-deductible health coverage works by charging a lower monthly premium than standard plans, then asking for more out of pocket in the form of a deductible. The plans are generally thought to reduce unnecessary health spending, on the theory that when consumers need to pay out of pocket, they’ll be more discriminating. But surprisingly little is known about how people actually respond.

J. Frank Wharam, MD, MPH, an associate professor of population medicine at the Harvard Medical School, says high-deductible plans often come as a surprise. “There is a strong learning effect, where people are just cruising along and their employer might have mentioned something about their insurance, but they haven’t really internalized that. When you have to use services and you get a $700 bill in the mail, that’s when your eyes open and you realize things are a little different.”

Wharam and his colleagues study healthcare use over time in large populations to try to capture how people behave when faced with new deductibles. They’ve found that when preventive care, such as screening for cancer or cholesterol, is covered without cost, people will use it, regardless of deductibles. (Other studies have shown people often won’t pay for preventive care out of pocket — potentially endangering their health and creating higher costs down the road.) That’s one reason the ACA includes so many forms of free preventive care.

They’ve also found high-deductible plans reduce overall spending for individuals and families. In one study, emergency department visits for those switching to a high-deductible plan went down about 10 percent overall nearly a decade ago, when high-deductible plans were first becoming popular. Visits for serious conditions remained stable, while those for less serious conditions dropped. This is generally what policy makers hope to see, since visiting the emergency room for minor ailments is expensive and usually unnecessary.

But the good news may stop there. Families may delay or forego care entirely, and vulnerable populations may be especially sensitive to price increases. In a follow-up study, Wharam looked at emergency room visits and hospitalizations specifically among low-income, low-education people. He found that among this group, emergency department visits decreased across the board — even for severe conditions. After patients in the study switched to a high-deductible plan mandated by their employers, emergency room visits for serious health issues decreased by nearly a third after two years. Among the bottom 20 percent of earners, emergency department visits had dropped by almost half (47 percent) by the second year. Hospitalizations also decreased 23 percent for the group in the first year, then jumped back up to baseline levels in the second year.

Wharam says the study points to lower utilization in the first year of a high-deductible plan leading to more serious health conditions in the second year. “We can’t say for sure what’s going on, but our concern was that those lower-income, lower-education patients might have been delaying needed visits. Ultimately, that’s catching up to them, and by the second year, they couldn’t defer those visits anymore.”

(A recent survey of emergency doctors indicates emergency room visits may, indeed, be on the rise following the 2014 implementation of the ACA.)

What is clear: high-deductible plans don’t seem to make people more proactive about their health. “Proponents of high-deductible health plans believe these plans might spur people to become healthier,” Wharam says. “They might say, ‘I don’t want to get breast cancer, which is expensive, and I don’t want to have to pay for it, so I’m going to go get my screening.’”

In another study, Wharam found low-income women didn’t change their use of breast or cervical cancer screening after switching from a traditional to a high-deductible plan — even though the tests were free under both plans. Low-income groups are known to be less likely to use healthcare, but the study suggests a high-deductible plan isn’t going to change that state of affairs. “We’ve never found that high-deductible insurance spurs people on to become more healthy,” Wharam says. “Rates were suboptimal, but unchanged.”

Another “vulnerable population” in high-deductible plans: men. In a 2013 study, Wharam found men with a high-deductible plan were 22 percent less likely to visit the hospital or emergency room for low- or medium-severity conditions, and 35 percent less likely to seek care for severe conditions, than men enrolled in a traditional HMO. “It’s well documented that men are less likely or more hesitant to go to the doctor, but no one has shown that out-of-pocket costs might raise an additional barrier,” Wharam says. “That raises concerns that men might be putting off care they need.”

While high deductibles may be here to stay, they don’t yet affect all those insured. ACA marketplace plans offer subsidies for low-income earners and are required to cap out-of-pocket expenses each year — the HealthPocket study found average limits in the range of $6,000 for individuals and $12,000 for families in both Bronze and Silver plans. (For detailed help calculating what you’ll pay with a marketplace plan, see this independent site.)

But those costs are in addition to monthly premiums, and — among other exclusions — some health costs don’t apply to the deductible. For a middle-income family, a health incident or two in autumn one year followed by continued health issues into the next year could add up to tens of thousands of dollars in a short period of time.

Wharam suggests making deductibles income-sensitive, and says employers can also allocate more funds to health savings accounts for lower-income workers, which some are currently doing. “Right now, our system is basically moving toward high deductibles without regard to evidence of how people respond to high deductibles,” he says. “The Affordable Care Act does include income protections, but those protections for middle-income people really don’t leave people too protected at all.”

The ACA is still a work in progress, policy makers say. In the meantime, what should you do? Since the ACA provides subsidies to those with the lowest incomes, marketplace plans are usually an excellent choice.

It’s those in the middle of the income range who may struggle, at least for now. If you’re in this group, experts suggest high-deductible plans are best suited for healthy families and individuals. For those with chronic conditions or the severely ill, it’s worth trying to find a plan that fits your needs.